Income protection FAQs

To help you understand Income Protection a little better, we have made a list of the most common questions customers looking to take out Income Protection ask.

If your question isn’t on the list or you want to know more information then please do contact us.

What is Income Protection?

Income Protection Insurance is simply insurance that could replace your income should you fall ill or be injured, making you unable to work, or if you are made unemployed. Read a full description in our Income Protection Buying Guide, or learn more with our special Income Protection Insurance Jargon Buster.

If I am employed, is it a legal requirement that I have Income Protection?

Income Protection insurance (or IPI as it is known in short) is not a legal requirement, though you would need to assess your circumstances if you were to not be able to work; could you afford to support your outgoings and family?

Many people feel that insurance like Income Protection would be expensive and unaffordable but what many don’t know is that it can often be less than £10 per month (depending on individual circumstances).

If I took out Income Protection Insurance, what would I be covered for?

In most Income Protection policies, there are 3 main options that are covered; Accident and Sickness only, Unemployment only or Accident, sickness and unemployment combined (ASU).

How much could I claim through my Income Protection Insurance and how long for?

You can usually claim a maximum amount of your net monthly earnings (after tax). Any state benefits that you also earn will be deducted. This is typically up to 70% of your gross earnings and it is usually tax free.

Depending on your individual policy, the length of time your payouts will continue will be until you return to work, when your policy expires or when you reach retirement. This is frequently known as the ‘benefit period’.

Policies can last from anything as little as 1 year to retirement age (most insurers require you to be a minimum of 18 years old to start income protection insurance.)As long as you keep paying your premiums, the policy and cover will remain in place.

What different Income Protection policies are there?

There are mainly 3 different policies which can alter your protection and premiums.

  • A guaranteed protection policy is where the premiums you pay will remain the same throughout your policy duration, unless you change the type of cover you receive. This type of policy can generally be the most expensive option, but can be the most cost effective for you over time
  • A reviewable policy is where your premiums are reviewed regularly, usually every year, and can often change with circumstances of your age and your health.
  • An age-related policy is where your premiums increase with your age.

What is short and long term income protection?

Short term protection is where a policy will provide protection for a fixed amount of time after a successful claim, usually paying out a number of months. Long term protection provides cover if you become seriously or terminally ill and are not likely to work again.

I have a mortgage, should I have mortgage payment protection?

When you take out a mortgage, some providers may advise you to take out Mortgage Payment Protection cover, which basically is a form of income protection which, in the event of you being away from employment due to accident, sickness or unemployment, your mortgage payments will be covered. It is of benefit to have such a policy, considering the implications that could happen if you mortgage could not be paid and the financial effect it could have.

I make loan repayments, would these be covered?

There is a protection called Loan Protection, which is a cover where your committed monthly loan repayments are covered if you are unable to work due to unemployment, illness or accident. There is also what is known as PPI protection (Payment Protection Insurance) where your minimum monthly credit card payments will also be covered in the event of making a claim.

Is income protection insurance and critical illness insurance the same?

When reading through each policy, it is hard to recognise what the difference is, however, they are not the same. Choosing the right income protection policy will normally pay out a regular income if you were off following sickness, accident or unemployment. This could be for a short or long period of time. Critical illness protection usually pays out a one off lump sum if you are diagnosed with an illness that would show a high risk of you not being able to return to work again.

I am self-employed. Am I able to get income protection insurance?

As with all insurance policies, people’s individual circumstances are assessed to determine the policy premium, but what many people may not know is that self-employment is one of the most common groups to take out income protection insurance. Due to the potential risk of unemployed periods, it gives peace of mind that financial commitments are covered.

What determines the cost income protection?

Your premiums are based on factors such as your age, your health (including your family’s health), your occupation, your fitness as well as if you smoke and how much alcohol you may consume. These are all factors that insurers believe can affect your health so at the point of taking out the policy, the younger you are, the cheaper you premiums can be based on younger people, generally having better health.

Is there anything that will prevent me from taking out income protection?

Your policy document will outline the full exclusions of your policy, but typical things will include any pre-existing medical conditions which you were aware of or treated for before applying for the policy, illnesses or disabilities as a result of a criminal act or a self inflicted act which also includes drug or alcohol misuse, Pregnancy.

Will my state benefits be affected if I made a claim?

It is a possibility that your means-tested benefits could be affected if you were to make a successful Income Protection claim.